The Movement for Ecological Truth

This blog was inspired by the following quote by Oystein Dahle, former Vice President, Exxon, Norway:
"Socialism collapsed because it did not allow prices to tell the economic truth. Capitalism may collapse because it does not allow prices to tell the ecological truth."

Monday, May 01, 2006

So what would such a plan look like?

Because there is lots of interest in gasoline right now, I'm going to start with petroleum, but this method can (and should) be applied address across the board, starting with coal and other fossil fuels and moving to mining, lumber, and grazing and eventually to overdevelopment, loss of biodiversity, and toxic emissions.

First, we calculate the cost to society of burning petroleum. We phase in a tax on the import or use of petroleum equal to this, and refund the proceeds to all legal residents (equally per capita).

Back in 1998, the "external" cost of gasoline was calculated at roughly $9 per gallon of gasoline:

http://www.icta.org/doc/Real%20Price%20of%20Gasoline.pdf

So this means implementing a tax of about $500/barrel, which I'd phase in at $10/barrel every month for 4 years. (Actually, some of this money would be recovered by reducing subsidies -- the net effect would be the same).

Assuming our use dropped from 15M barrels a day to 10M barrels a day, this would still raise $1.8 trillion dollars a year, or over $6,000 per person.

For a family of four, this means $24,000 to spend. They could use it to buy the same products you always have (not only will gasoline cost more, but utility bills will go up, the cost of plastic will go up, and even the cost of items such as food will go up, because they require petroleum to process and ship). Or, they could save money by driving less, installing insulation, buying local produce, and doing all of those conservation actions which they could never econommically justify (or even afford) before.

This is one of the most popular tools of lawmakers. Who doesn't mind being paid to buy things? On the other hand, this type of law encourages us to replace things prematurely, and doesn't help people who economize by using things less.

These are good, but lack the flexibility to handle individual situations (for example, because a company which produces only limousines has a different characteristic than one which produces mostly commuter vehicles, you either need to set separate standards for different types of cars or have weak standards which don't help).

This is very good, as it allows the consumer to make an informed decision about the actual costs of their purchases. However, it only tells people what they personally will save, and leaves it up them to calculate how it much will benefit society and how much of a sacrifice they are willing to make to help.

-- Polluter pays (Superfund, smog checks)

This the best one yet. It is the most efficient, and perhaps the ONLY way to get markets to tell the ecological truth is to have polluters pay.

However, it is done in a haphazard way (the superfund penalties, for example have never been enough to cover cleanup costs, have been delayed through various appeals -- and they aren't even collected anymore, so far as I can tell). Smog checks are not based on how much pollution you produce, only how much you produce per mile -- a relative penalty for people who drive less.

Why do we need to tell the ecological truth

Right now, even with higher gas prices, it is hard to justify being a conservationist. For example, consider the choice between driving and taking the bus:

If you take the bus, you have to walk downtown, wait 15 minutes, and take a forty-five minute ride to work. Doing this again on the way home, means over 2 hours and $4 in bus fares.

If you drive, it takes only 30 minutes each way, and requires 2 gallons of gas, which is $6.

That means that for $2, I can save an hour (discounting the walk, because you need the exercise anyway). If you spent an hour longer at work, you'd make $10. This means that if you do the "right thing" and conserve energy, your standard of living goes down by $8.

Of course, you have done a huge favor for your neighbors by decreasing traffic congestion, avoiding global warming, and cutting down on pollution. But it can be hard to convince your neighbors to return the favor.

What is "Telling the Ecological Truth"

Telling the ecological truth means that the price of something takes into account the enviromental damage that it does.

For example, when you buy an item, you pay the wages of everyone who work on it, you pay for the raw materials that went into it, and you paid profit to whoever owned the factory and the store. Since you were willing to make the purchase, the amount you paid must have been less than the benefit you got from purchasing, so your standard of living went up.

However, the production of that item produces pollution. This makes the standard of living of everyone around you go down. However, since this does not directly affect you, the price you paid understates the true cost of the item you purchased.

An example of telling the ecological truth is the tax rebate being offered on solar panels in California. The truth is that everyone benefits from the electricity you produce, the fact that electricity didn't need to be generated to meet your demand, so you ought to be compensated for that.

Another example of telling the ecological truth is when companies get fined for illegally dumping toxic chemicals.

The Movement for Ecological Truth

This blog was inspired by the following quote by Oystein Dahle, former Vice President, Exxon, Norway:
"Socialism collapsed because it did not allow prices to tell the economic truth. Capitalism may collapse because it does not allow prices to tell the ecological truth."